Chicago Businesses – Watch out for scams

Many of us are looking for cash. We’re all looking for ways to create wealth and save taxes. But when a prospective tax scheme or business strategy sounds too good to be true, it usually is.

Many times I have seen how a client became caught up in an elaborate business ruse, and as aCPA in Chicago area, who have helped countless businesses in filing their corporation tax returns, I have to sort through the resulting disaster for them. They never had to needlessly lose money in this way.

Considering these days economic times, when the wolves come out in sheep’s clothing, there are more crooks out there, and they’re looking for an edge. It’s a recipe for disaster.

Some of the most common scams you should watch out for:

The non licensed business coach, or tax adviser

“Coach” is a title someone often uses when they weren’t smart enough to finish school and get a graduate degree. Now there are great reasons for “coaching” in certain areas of business, but when they start giving tax and legal advice, watch out.

There are a plethora of call center operations that rope would-be entrepreneurs into paying money to talk to someone wearing sandals and a headset who has no business offering tax and legal advice, or doesn’t know anything about running a business.

The “I have a deal for you guys.”

It’s called “affinity fraud.” A friend or relative tells you that someone in their neighborhood or church has found a “great new business” to invest in, and you should chip in big money, too.

On its own, investing in a start-up can be a great idea if you can stomach the risk, but watch out if someone says you don’t need a lawyer or makes big promises. Be realistic, and make sure you use a lawyer to properly document the investment. Suing to recoup losses can often prove too costly to make a lawsuit worth it.

The corporate credit “shelf corporation.”

I have had numerous clients come through my office wondering what they might do with a “shelf corporation” they paid $5,000 to $15,000 for.

Many of  were sold on flashy terms like Dunn and Bradstreet numbers, Paydex scores and unsecured credit, and how they would somehow win larger loans by using the shelf corporation name. The truth is there is no short-cut process. Building corporate credit takes time.

The bogus state filing fee bill.

You register a corporation or LLC in your state, or make the other required filings. Then, all of a sudden you get a piece of mail with a state insignia on the envelope, telling you that you owe another fee.

Plain and simple, these can often be a scam. There are so many times I’ve had clients call me and say, “We got this piece of mail about a state fee. What’s this all about?” And I say, “It’s a scam. Don’t pay it.” And they say, “Really?” Don’t ignore any notice you receive that looks official, but make sure you get a second opinion.

Conclusion

Unfortunately the list could go on and on. So what’s the best way to avoid a scam?

Ask for credentials, make sure you understand who is actually going to be doing the work for you or giving advice, perform due, and get a second opinion from a trusted licensed adviser when tax and legal matters are at stake.

Finally, don’t forget, if it’s too good to be true, it probably is.

Don’t forget to call us at 773-728-1500 if you have any questions related to tax planning issues.  We also provide bookkeeping services for businesses in the Chicagoland area.

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MARRIED COUPLES VS. SAME SEX COUPLES? WHO PAYS MORE: BY CHICAGO CPA

The federal 1996 Defense of Marriage Act doesn’t offer tax breaks for gay spouses even more because the federal government doesn’t recognize gay marriage it results in paying as much as $6,000 extra a year for the same sex couples.

While filing jointly, as a married couple provides tax benefits, the same sex couples can not enjoy the same perks because they are not allowed to file their federal returns jointly.

However, there are some states (more than 12 now) that grant full or partial marriage rights to same sex couples, but the federal government is governed by the 1996 Defense of Marriage Act, which has the support of conservatives who consider that repealing the act would erode religious liberty for people who believe in the traditional definition of marriage.

We, the Chicago CPA have done the following analysis to compare who would pay more in individual income tax – A Married couple or a same sex couple??

Just to make it clearer we will give you an example of the act’s tax implications for a family with one spouse earning $100,000 and the other spouse staying home with the family’s two kids.

Case I: same sex couple

The working spouse files as head of a household and the spouse that stays home with the kids is considered to be a qualifying relative. As a result the federal tax owed by the household’s is $13,199.

Case II: married couple

The tax liability that the married couple who files a jointly tax return would be $8,656.

The result is a $4543 higher payment for the same sex couple. WHY? Because when you file as head of a household such a designation comes with disadvantages. When you file as head of a household instead of married filing jointly exposes more income to a higher bracket, plus the standard deductions are lower for a head of household than they are for married couples filing jointly.

To find out which status is right for you, please call us at 773-728-1500.

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Photo from Nouhailler on flickr.com

Income Tax Tip: Save money by deducting mileage expenses

Don’t miss out on tax savings this year by forgetting about tax deductible travel expenses. There are four cases in which you may deduct your travel expenses. In each case, if you drove, you may deduct a standard rate per mile. If you took another form of transportation, the actual fare for a taxi, bus, or train may be deducted.

  • BUSINESS: Business miles are those driven for business, other than your daily commute. If you are travelling out of town, or even nearby for a meeting, conference, or seminar, you may deduct these miles. If your principle place of business is a home office, you may deduct miles driven to and from other work locations.
  • MEDICAL:  Qualifying miles are those driven to medical or dental appointments occurring in order to prevent or alleviate a physical or mental defect or illness. This includes miles driven to and from doctors, dentists, surgeons, chiropractors, psychiatrists, psychologists, and more.
  • MOVING: Moving expenses may be deducted if the move is for business purposes. For moving to qualify, the new residence must be located fifty miles or more closer to the new place of business than the old residence.
  • CHARITY:   Travel expenses that necessarily arise while performing services for a charitable organization–such as through volunteer work or as an appointed representative of a religious institution–are considered charitable and thereby deductible. This applies whether you pay the expenses directly or indirectly (by contributing to the organization) as long as the trip is not significantly for recreation or vacation.

Using the most up-to-date mileage rates will help you get the biggest deductible possible from your 2011 tax return. Standard mileage rates are used to calculate the deductible costs of driving a vehicle for business purposes, charitable purposes, medical purposes, or for moving over 50 miles for business purposes.

For cars, vans, and pick-up trucks, the mileage is:

55.5 cents per mile for business miles

23 cents per mile for medical or moving

14 cents per mile for charitable organizations

These mileage rates were given on July 1st, 2011 by the IRS for the mid-year adjustment. The IRS recently came out with the mileage rates effective January 1st, 2012, and they are the same as the current rates.

These tips come from your favorite Chicago accountants at TaxCutters, Inc.  Feel free to call us at (773) 728-1500 or email info@taxcutters.com for more information or tax help.

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